Big Cuts at Starbucks

Jul 02, 2008

Whoa. This is surprising. There had been talk of Starbucks slowing its expansion plans. But there was little indication that it was going to start making cuts of this magnitude. Previously, the company said it might shut 100 stores. Add 500 to that total. The coffee giant is shutting 600 stores and cutting 12,000 jobs.

Starbucks Corp (SBUX.O: Quote, Profile, Research) said on Tuesday it plans to close 600 underperforming U.S. stores and cut up to 12,000 full- and part-time positions, as it copes with an economic downturn and increasing competition.

The coffee seller, bracing for its first full-year profit decline since 2000, has been grappling with the slowing U.S. economy and consumer spending at the same time that major competitors like McDonald's Corp (MCD.N: Quote, Profile, Research) have begun attacking its core business.

Starbucks plans to close the company-operated stores by the end of March 2009. The related job cuts would reduce the company's U.S. workforce by about 8 percent.

The news lifted shares nearly 5 percent.

In a conference call with analysts, Chief Executive Peter Bocian said the move should improve company's domestic profitability and help it meet previously issued forecasts calling for accelerating earnings for fiscal 2009 through 2011.